Las Vegas Sun

March 28, 2024

Wynn remains skeptical of British opportunities

Las Vegas Strip casino-resort developer Steve Wynn isn't a believer in the supposed untapped power of the United Kingdom gaming market.

While Las Vegas-based competitors MGM MIRAGE, Harrah's Entertainment Inc. and The Venetian owner Las Vegas Sands Inc. have scrambled to line up deals to tap into what they see as the U.K. market's incredible upside, Wynn has waited on the sidelines.

Only the U.K.'s restrictive rules that limit slot jackpots, forbid credit play and have the effect of confining action to stuffy clubs stand in the way of a potent casino market, U.K. casino advocates argue.

MGM MIRAGE President and Chief Financial Officer Jim Murren said earlier this year that the Strip's biggest operator thinks the U.K is "the single most exciting opportunity in the world."

But after last week's report by a United Kingdom legislative committee recommended a more cautious approach than some U.S. operators were hoping for, several Wall Street analysts said the market's prospects were diminished.

The biggest drawback, analysts said, were proposed limits on the number of slot machines casinos could have, based on a ratio of slots to table games. Larger casinos could have as many as eight slots per table, but the biggest 1,250-device casinos would have to have more than 150 table games.

Only three Strip casinos listed in the most recent Bear Stearns North American Gaming Almanac have 150 or more table games: Bellagio (178), MGM Grand (164), The Mirage (153), and all have at least 2,300 slot machines.

Wynn said last week that he's been cautious about U.K. casino prospects all along.

"When people say the U.K. is the market with the biggest upside, it's simply not true," Wynn said. "I've always been a little skeptical about the U.K., and I've always thought casino prospects in London were a bit murky."

Wynn believes Macau and other Asian markets have the biggest casino-market upsides. His Wynn Resorts Ltd. won one of Macau's three government-approved casino concessions, and Wynn hopes to break ground on the company's planned $500 million-plus Wynn Macau hotel-casino within a couple of months, he said.

One reason Wynn isn't overly enthusiastic about the upside potential of rules liberalization in the U.K. is that there are already casinos operating in the market, albeit with restrictive rules.

"We know what the demand is for (table game play) right now," Wynn said. "The reform of the law doesn't radically alter the equation."

The semi-private London casinos now cater mostly to Arab players, at least at the high end, Wynn said.

He also said that U.K. laws and development restrictions make it difficult to build modern, Las Vegas-style resorts in the already mostly developed nation.

"You end up having to refurbish an existing building," Wynn said, noting that the limitations would cost U.S. operators more -- yet would produce a less satisfactory casino product.

Wynn said the key for prospective U.S. operators was the ability to create the fanciful surroundings that fuel the modern megaresort's synergy of gambling, hotel, restaurant, show, retail and convention revenue.

"I don't think gambling in and of itself is an attraction (any more)," Wynn said. "The noncasino energy of Nevada resorts, with their shopping, dining, entertainment and fanciful environments, is their real attraction."

The U.K.'s ultimate casino tax rate will have more to do with the market's upside, Wynn suggested, noting that the lower the rate, the more able operators will be to invest significant money in the nongaming attractions he believes are the true casino draws.

Harrah's Entertainment executives said last week that the pre-legislative scrutiny committee's report was definitely not a setback to the company's plan to join British bingo hall operator Galaxy Group Plc to develop as many as 10 regional casinos.

And MGM MIRAGE spokesman Alan Feldman said the company's multiple plans to tap into the U.K. market weren't hurt by last week's report.

"Would we have preferred a higher (slots-to-table games) ratio?" Feldman asked. "Yes. But there was always going to be a cap, and the number allowed was always going to be based on the ratio (of slots to tables)."

The legislative committee, Feldman said, came out with a report that backs increased international investment in the country's gaming business, and the report doesn't affect the company's perspective on U.K. prospects.

"The U.K. remains one of our centerpieces of future growth, but so does Asia, including Thailand, Singapore and Macau," Feldman said.

Feldman agreed with Wynn on the importance of the U.K.'s eventual casino tax rate.

"If the tax rate is set too high, the whole question about the number of machines is irrelevant," he said.

The Venetian executives were not immediately available for comment and have yet to publicly respond to the report.

UBS Warburg casino equity analyst Robin Farley said in a Monday research note that the pre-legislative scrutiny committee's report indicates less of an appetite for a gambling expansion than was previously thought.

She said the report's recommendations could restrict the U.K. market to roughly 15,000 slots instead of the consensus estimate of 30,000 games.

"This could reduce the opportunities in the U.K. for U.S. gaming companies," Farley noted.

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